ME Bank connects with brokers as second-tier lenders gain ground
Members Equity Bank will look to sell its home loans through mortgage brokers after signing a distribution agreement with National Mortgage Brokers (nMB).
Melbourne-based nMB is the bank’s first broker partner, and it has plans for additional third-party agreements further down the track.
The bank’s decision to partner with brokers comes as more lenders look to strengthen ties with the broker market.
According to Fujitsu Consulting’s October 2011 Australian Mortgage Industry report, mortgage brokers currently originate 43% of all mortgages in Australia.
As a result, lenders have been improving their broker service propositions, including NAB, which last year extended its waived application fee and $700 switching incentive to its broker-only Homeside brand.
In October last year, a poll of 942 brokers by NAB’s Homeside division found that more than two-thirds of brokers believe the bank has improved its broker interaction.
In July, St George increased the amount of commission brokers could earn by upping the upfront commission component from 50 basis points to 65 basis points and also reintroduced a 15-basis-point trail commission.
Gerald Foley, managing director of nMB, says the negotiated distribution agreement allows ME Bank to make its products available to the estimated 40% of new borrowers who use a broker.
“Our network relationship will also deepen ME Bank's accessibility into areas where it may not have strong representation today,” says Foley.
According to Ian Hendey, ME Bank’s group executive for brand, product and distribution, the decision to use third-party distribution followed considerable research across its customer base “that clearly signalled the broker channel was a key additional distribution channel”.
“Our research found that that more than half of our target market of industry super fund and union members would contact a mortgage broker for their home loan needs,” he says.
The decision by the bank to part with brokers comes as figures from mortgage aggregator AFG revealed that non-major bank lenders’ share of mortgage lending increased strongly in December to nearly a quarter of all loans.
Non-major bank lenders wrote 24% of all AFG loans in December, up from a previous 12-month average of just 19%.